Earnings Call: Q2 2021

Jul 29, 2021

Good evening, everyone. I'm Jeremy Price, MicroStrategy's Senior Vice President of Financial Planning and Analysis and Head of Investor I'll be your moderator for MicroStrategy's 2021 Q2 earnings webinar. Before we proceed, I will read the Safe Harbor statement. Some of the information we provide during today's call regarding our future expectations, plans and prospects may constitute forward looking statements. Actual results may differ materially from these forward looking statements due to various important factors, including risk factors to us in our most recent 10 Q filed with the SEC. We assume no obligation to update these forward looking statements, which speak only as of today. Also during today's call, we will refer to certain non GAAP financial measures. Reconciliations showing GAAP versus non GAAP results are available in our earnings release and presentation, which which were issued today and are available on our website at www.microstrategy.com. I would like to welcome you all to today's webinar and let you know that we will be taking questions using the Q and A feature at the bottom of your screen. You can submit questions throughout the webinar and Michael or Fong will answer them at the end of the session. Please be sure to provide your name and your company's name when submitting your questions. With that, I will turn the call over to Michael Saylor, Chairman and CEO of MicroStrategy. Thank you, Jeremy. I'm Michael Saylor. I'm the Chairman and CEO of MicroStrategy. I'd like to welcome all of you to today's webinar regarding our 2021 Q2 financial results. I'm here with Phong Li, Relations, our President and Chief Financial Officer. First, I'd like to pass the floor to Phong, who is going to provide an Thank you, Michael. I'll start with some highlights from our 2nd quarter performance. MicroStrategy performed well across the board, demonstrating continued momentum in our business analytics software business, while also completing another successful capital raise that expanded our digital asset holdings. We built upon our strong first quarter performance have now delivered 2 of the strongest quarters of operational performance in years. We're pleased with the strength and consistency of our execution as we continue to benefit from the numerous product introductions we made since 2019 and the operational changes we undertook in the first half of twenty twenty. Total revenue in the quarter grew 13% year over year or 10% on a constant currency basis and it was up 6% versus Q2 of 2019, which is our strongest Q2 quarterly performance in 6 years. Our cloud offerings continue to gain traction with both new and existing customers. While we once again got some benefit from a favorable comparison against the COVID-nineteen impacts during Q2 2020, Our performance shows clear momentum across our entire business. License revenue grew 50% year over year, but more impressively grew 10% versus the Q2 of 2019. Subscription revenue in the quarter was up 29% compared to Q2 2020. Current subscription billings grew 13%, our 5th straight quarter of double digit growth. Our Q2 subscription billings were impacted by a decrease in short term deferred Relation as we no longer include contract values that are invoiced in the future. Without this decrease, Relations. Q2 subscription billings would have grown 42%. We had another strong quarter of profitability with a non GAAP operating margin of 17%, up 10% year over year. Our performance is being driven by broadening adoption of the MicroStrategy platform. Existing customers have long recognized the value of MicroStrategy looking for more areas to deploy our best in class BI platform. New customers are also attracted to our solutions, recognizing the need for more robust capabilities than those offered by lightweight dash Relations. Customers are well aware that legacy vendors like IBM and SAP have de prioritized BI in favor of their respective cloud transitions. And thus, as enterprises look to rebuild applications for the modern world, MicroStrategy's modern, Relations. We are pleased with the market reception of HyperIntelligence and Hyper. Now. We signed several dozen HyperIntelligence customers in the quarter as its modern intuitive design puts actionable insights into workers' hands instantaneously. Let's look at a few key wins in more detail. We signed a net new win with a German freight company where we beat Tableau and Power BI to displace a legacy solution. We signed a new win with a leading cloud communications vendor for a 7 figure OEM transaction where we beat Tableau and Microsoft Power BI. And finally, we signed a new license deal with 1 of the leading cryptocurrency exchanges. We also saw an increase in migrations of existing on premise customers to our cloud solution, which also included an expanded deployment of MicroStrategy as part of the migration process. We had several wins in the quarter where ARR from that customer more than doubled from its prior run rate, providing value both to the customer and MicroStrategy. Some exciting conversions during the quarter included: 1, a leading clothing retailer in the U. S. Who nearly doubled the size of their annual commitment to us and is now approaching $1,000,000 in ARR 2, a sizable expansion of 1 of the world's largest beverage producers, extending its MicroStrategy deployment to now include collaboration and federated analytics features as part of its migration to the cloud. And 3, one of Europe's largest grocers signed a multimillion dollar expansion to further expand MicroStrategy as its enterprise standard BI platform. Another exciting area of strength for us is our embedded OEM business, where we are number 1 in the market. We've seen increased interest from new and existing customers that want to leverage our best in class analytics platforms as a core part of their solution. We experienced notable growth in both the number and size of OEM opportunities. We believe our extensive investment in Relation. Our success in the market has been driven in large part by the investments we have made and continue to make in our solutions. Even as we significantly enhance the overall profitability of the company, In 2021, we expect our R and D investment to be the highest on an absolute dollar basis since 2014. And And as we look into the future, we expect R and D spend in 2022 and beyond to be even higher. Our investments in cloud, OEM, security Relations. In modernizing our UI through workstation, dossier, library and HyperIntelligence are a reflection of our commitment to offer our customers the most complete business analytics platform in the world. A key part of our strategy is to leverage the virtual wave to drive greater efficiency in our go to market efforts, which enhances our overall profitability and provides additional resources to invest in R and D. For example, product license revenue grew 10% since Q2 2019 and subscription revenue has grown 46% over that time, while we reduced sales and marketing expense by $8,000,000 or 16% over that same time. Our performance over the last year has validated our decision to move to a fully virtualized go to market model at the beginning of COVID. We believe we can continue to generate additional leverage from our sales and marketing spend over time while continuing to generate consistent top line growth. Turning now to our digital asset strategy, we had several exciting developments in the Q2. First, we surpassed the 100,000 Bitcoin mark, ending the quarter with approximately 105,085 Bitcoins purchased at an average price of approximately $26,080 or approximately $38,467 per Bitcoin. The capital used for our latest Bitcoin purchase included proceeds from our successful $500,000,000 upsized senior secured note offering that we priced during the quarter. This is our 3rd successful capital raise with total gross proceeds of $2,200,000,000 It is important to note that during the quarter, we created a new subsidiary, MacroStrategy LLC that was formed to hold the approximately 92,079 Bitcoins we owned prior to the senior notes offering. Additionally, we recently put in place an at the market shelf registration to sell up to $1,000,000,000 of Class A common shares. Release. We've not executed on the shelf and intend to be opportunistic going forward. We will continue to evaluate opportunities to raise additional funds across the capital Relation to execute our Bitcoin acquisition strategy. Bitcoin prices were volatile in the quarter, resulting in a GAAP non cash impairment charge of $484,800,000 Our calculation of the non GAAP market value of our Bitcoin holdings As of June 30, was approximately $3,700,000,000 compared to a cost basis of $2,700,000,000 and book value of $2,100,000,000 As of July 28, 2021, at 4 pm During time, the market price of 1 Bitcoin in our principal market was approximately $40,416 which equates to a non GAAP market value roughly $4,200,000,000 for 105,085 Bitcoins, a 56% appreciation over our cost basis. We intend to continue to deploy additional capital into our digital asset strategy. As As one of the leading advocates for digital assets, we've been working with peer companies and various policy setting agencies in the U. S. To try to determine a more appropriate accounting framework for digital assets. As the largest corporate holder of digital assets in the world, we believe we have a responsibility to share what we've learned since embarking on this strategy to make it easier for other companies to diversify their balance sheet with this new asset class. Before going into a more detailed review of our financial performance, let me just finish by saying how pleased we are with our performance in the second quarter. The first half of twenty twenty one and the last four quarters since the primary impacts of the pandemic. We are delivering on both of our strategic priorities. Operationally, we're realizing the benefits of the investments in the Enterprise Analytics Software business, which is leading to both improved revenue, Relations and increased profitability. Our operational success leaves us well positioned to deliver on the long term financial targets laid out in our Investor Day last November. At the same time, our digital asset strategy has generated substantial value for shareholders and elevated MicroStrategy to a global leader in the Bitcoin market. The increased visibility of the company due to our digital asset strategy is also helping to initiate Relations, we would have been unlikely to participate in otherwise. We believe we are in the early stages of each of these trends and that there continues to be meaningful opportunities for further improvement in both of our strategic focus areas. Turning to our Q2 2021 financial results in more detail. GAAP revenues for the quarter were $125,400,000 up 13% year over year and up 6% from the Q2 of 2019. Product license revenues were 22.2 $1,000,000 in the Q2 of 2021, up 50% year over year and up 10% from the Q2 of 2019. Relation. Subscription services revenues in the Q2 of 2021 were $10,300,000 an increase of 29% year over year and up 46% from the Q2 of 2019. The growth in subscription services revenue reflects the growing portion of our product bookings that are related to our managed Relations. Our current subscription billings were $10,600,000 an increase of 13% from the Q2 of 2020. We're pleased with the performance of our cloud business in the quarter. Product support revenues were $71,000,000 in the Q2 of 2021, a 1% increase year over year. The year over year increase was primarily driven by favorable impact of foreign currency translations, partially offset by certain existing customers converting from perpetual licenses to our subscription services or term license offerings. Product support revenues were down 2% year over year on a constant currency basis. As we see more on premise conversions to our cloud offering, We'd anticipate product support revenue will experience a modest decline over time. Finally, other services revenue, which Relations largely reflects our consulting services were $21,800,000 in the Q2 of 2021 and increased 23% year over year. Improvements in consulting revenues is an indication of continued engagement from our customers to modernize and expand deployment of their MicroStrategy platform. Total deferred revenue on June 30, 2021 was 190,100,000 This is up 10% year over year, primarily due to a 48% increase in deferred subscription services revenues and a 6% increase in deferred product support revenues. As we see more existing customers converge to our managed cloud platform, There's a shift from deferred product support revenues to deferred subscription services revenues. Total GAAP expenses were $539,600,000 in the Q2 of 2021, which includes a digital asset impairment charge of $424,800,000 meaning that any decrease in their fair value below our book value for such assets at any time subsequent to their acquisition requires us to recognize impairment charges. Total non GAAP expenses were $103,700,000 in the Q2 of 2021, a 2% increase year over year. The year over year cost increase is mainly driven by better sales performance, which resulted in higher variable Relations for Sales and Marketing. Total GAAP operating loss was 400 and Relation. $2,000,000 in the Q2 of 2021, inclusive of impairment related to Bitcoin of $424,800,000 Relations and stock based compensation expense of $11,100,000 Total non GAAP operating income was $21,600,000 in the Q2 of 2021, a $13,100,000 increase year over year. Turning to the balance sheet, we ended the quarter with 56 $400,000 in cash. We issued $500,000,000 in aggregate principal amount of senior secured notes Relations bearing interest rate of 6.125 percent. The net proceeds from the sale of the notes were approximately $487,000,000 after deducting Relation. We used the net proceeds from the sales of the notes to purchase Bitcoin. The carrying value of our Bitcoin holdings as of June 30, 2021 was $2,100,000,000 which reflects a $689,600,000 cumulative impairment charge. It is also reflected as a loss on our GAAP income statement and in the period incurred. We exclude the quarterly impact to Bitcoin impairment charges from our non GAAP operating income and non GAAP diluted earnings per share calculations. We estimate the non GAAP market share value of our Bitcoin holdings was $3,700,000,000 at June 30, 2021, reflecting $1,600,000,000 of unrealized gains when compared to the carrying value of our Bitcoin at June 30, 2021. We're pleased with the execution of our 2 corporate strategies over the last 4 quarters. On a trailing 12 month basis, we've generated revenue of approximately 507,000,000 Relations, which represents 7% growth year over year. Our software business has generated non GAAP operating income of $90,000,000 on a trailing 12 month basis, which equates to a non GAAP operating margin of 13%. As a result of our strong financial performance, The company is raising our estimate of 2021 non GAAP operating income to $80,000,000 to $100,000,000 Additionally, over the last four quarters, the company has acquired over 105,000 bitcoins with estimated appreciation Relation 33% over the acquisition cost. Going forward, you should expect that we may purchase additional Bitcoin when our cash, cash equivalents Relations. And we may, from time to time, subject to market conditions, issue debt or equity securities in capital raising transactions with the objective of using the proceeds to purchase Bitcoin. Finally, we plan to engage in a search for the company's next CFO, with the management team focused on 2 corporate strategies, Growing our enterprise analytics software business and acquiring a hold in Bitcoin and with the increase in our public profile and operational complexity, We plan to engage in a search for a CFO to complement the management team and allow me to focus on my role as President, running the day to day business of MicroStrategy. I'll now turn the call over to Michael for comments on our Bitcoin acquisition strategy as well as market trends for Business Intelligence Software and our executive team. Thanks, Wang. Well, I'd just like to start by reiterating the company has 2 strategies. Relations. The MicroStrategy software mission is to make every enterprise a more intelligent enterprise via our business intelligence software platform. Relations. And our strategy with regard and plan with regard to that is make all of our functionality available on demand by the cloud, Relations. And we're well positioned to do that because that's our singular operational focus. With the exception of just a few people in legal and finance, the entire company is focused upon Enterprise Business Intelligence. That is our micro strategy. We have a second strategy, as you know, a macro strategy. And our macro strategy Continue to hold Bitcoin. It's a very straightforward strategy. Along the way, we'll be educating the world Relations. With regard to the benefits of digital property, we'll advocate Bitcoin and the benefits of the technology to corporations like to the public, to the media. And that will keep us busy, I believe. So micro strategy, macro strategy. Pursuant to our macro strategy, This quarter, we did complete that $500,000,000 senior secured debt offering. That was a big deal. We're very excited about it because it was a 7 year senior note. It's bearing interest at Relay, 6.18 percent interest. We thought that was a very favorable interest rate for a very favorable timeframe. We were able to purchase 13,005 Bitcoin using the proceeds of that debt offering. And we did that around $37,617 a Bitcoin. We thought that was a good price. Relations. And the reason that we did that deal was we thought that that was a deal that would be accretive to the other Relations. And it presented itself at that particular time. As Phong noted, in the entire quarter, we were able to acquire more than that, more than 13,005 Bitcoin. We acquired 13,759 Bitcoin at slightly higher average price 38,467. At this point, we've now invested 2,000,000,000 But calling it digital gold really understates it, digital properties a bit better. The ability to convey 1,000,000,000 of Relation. We think that acquiring Bitcoin at this time is going to be a wise strategic move. There will never be more than 21,000,000 Bitcoin. And we feel like there's a land grab right now To acquire as much as you can, because Bitcoin represents a macroeconomic solution Relation Solutions. It's a technical solution to mobile companies like an Apple or a Google or a Facebook It's also a technical solution to energy companies, because if you have stranded geothermal Or any kind of energy capability that's running at less than 100% utilization, you can monetize that So Bitcoin is a compelling technical solution for the energy industry. It's a compelling technical solution for big tech. It's a compelling macroeconomic solution. And because it's so decentralized, You have millions and millions of people thinking about how they can add value to Bitcoin and how they can use Bitcoin to add value to their own businesses. A few general views on the Bitcoin industry right now. The China exodus dominated the news in Q2. I think the China exodus was a really good thing for Bitcoin. The result was a decentralization of Bitcoin mining throughout the world. Bitcoin mining is really Relations. The China access was also a good thing because it decentralized Bitcoin Holdings. And you saw a general shift of the nexus of Bitcoin Holdings and Bitcoin Mining I think that long term, the westernization of Bitcoin is going to be good for Bitcoin. I think it's good for the U. S. Dollar. I think it's good for U. S. Technology. It's good for Western technology. And generally, what we're seeing is that Bitcoin Right. These are very, very powerful dominant digital networks and whereas they have grown to dominance Now we have something new, digital property that is aligning on the Bitcoin network with all of these other Western networks. And it's a good thing. Capital is flowing into Bitcoin in the second quarter. We saw this in the form of Bitcoin miners coming public. There are lots of Bitcoin miners that are either public or coming public. It's going to be a continual trend in the coming 6 months. And it's an exciting trend because a network of a dozen to 2 dozen publicly traded companies that are securing the Bitcoin network are going to be beneficial to the asset class. They're bringing financial capital to Bitcoin. They're bringing political capital to Bitcoin. They're bringing technical capital Relations. We saw many constructive developments with Bitcoin Investors in the 2nd quarter. Relation. More large banks in the Western world are supporting Bitcoin. Large exchanges are supporting Bitcoin. We see an expansion in the on ramps. Relations. We see more institutional investors supporting Bitcoin, Bitcoin Funds, Bitcoin ETFs being applied for Probably one of the most exciting pieces of news that I've seen is the result of the crypto.com survey that just came out today And that showed there to be 114,000,000 individual holders of Bitcoin as of, I think the end of June, maybe the end of May, May or June in that range. And we're adding about Relations. 2,000,000 more Bitcoin holders per week. So if you think about adding 2,000,000 a week And I'm breaking through $114,000,000 These are just incredible numbers. I pointed out That makes Bitcoin the most widely held financial asset in the world, in the history of the world, growing at the fastest rate. And that's just an extraordinary thing, right? You can't point to 114,000,000 holders of any stock, any bond, Any particular type of instrument in the same way that you see this with Bitcoin. Relations. I think that we're going to see this trend continue. And so all of these things are good for Bitcoin. If we add the last observation, which is, I think it's becoming clear that Bitcoin is here to stay Based upon mainstream media coverage and more and more regulators are taking an interest in Bitcoin, I interpreted this as a positive. I think there is an enthusiasm and an awareness that we need to support Crypto and Bitcoin and the regulatory frameworks throughout the Western world. And I think that that's going to drive a lot of constructive And as we make more progress with regard to all of these developments, I think that institutional investors get more comfortable Switching my conversation to software industry trends. The big software industry, the big players in software that we have traditionally competed against, They're starting to shift their focus to creating cloud platforms that they can use to offer open Cloud services that might compete with AWS and Azure. I think that has reduced their focus upon their Business Intelligence divisions. I think in general, they're under pressure to grow due to the macroeconomic environment. And because the big full stack software vendors are under that kind of pressure to grow, they'd have to look at Relations. Keep the top line growing more than 20% or 25% a year. And we can focus upon our core business. And I think that that's really good. It's very important. I think you see that our results and our growth this quarter is because we are focused on the core business intelligence business. And we're able to become a best of breed business intelligence company. I'm really excited by our results in Q2. Top line growth, 13%, Bottom line growth 153% for our non GAAP operating income year over year, 17% non GAAP operating margin is very healthy. Our subscription revenue is up 29%. This is a really strong number. Our non GAAP EPS So substantial beat on the bottom line and that's $1.72 a share versus $0.60 a share last year. So needless to say, we're pleased with the non GAAP EPS results. As Falun pointed out, it's our best 2nd quarter in 6 years. During that quarter, the CXO team worked like a well oiled machine. I don't really think the senior management teams ever worked better. The gears are all humming. We have decided to pursue a CFO search and we're doing that to allow Relations. To focus more on the presidential role, obviously, we've got a lot of ambition on our plate. We're excited about continuing to grow the enterprise software business aggressively. We're also very excited about our Bitcoin strategy. And by adding this one more role to the management team, it will allow us to maximize that opportunity. And so With that, I guess I'll go ahead and open up the floor to questions from the analysts and the investors. Jeremy? Thank you, Michael. We're going to jump right into questions. And so the first question is for Fong. First, congratulations on the great quarter. Have you seen any changes in the competitive landscape? And what impact do you expect the consolidation of BI and visualization tools will have on your business in the coming years? Sorry, rookie move. I was on mute there. Thanks, Jeremy. It's a good question. So thanks. We did have a really good quarter. We're excited about it. And I do think the changes in the competitive landscape are part of what's impacting the quarter. I mentioned a few of them, Mike mentioned a few others. Some of the really large legacy BI vendors, SAP's Business Objects, IBM's Cognos, Oracle's OBIEE. We all know those companies are really focused on transitioning their own businesses to the cloud, competing with Google and competing with AWS and Azure, and they've de invested in their BI platforms. So we're seeing an increasing pace of the inquiry and execution of migration off of those legacy BI platforms. And in the case that companies are looking to do that, especially large enterprises, we're the logical answer because they're looking for a full scale enterprise platform. That's what those Relations. Cognos, SAP Business Objects are, and so that bodes well for us. The other thing that we're seeing on the lower end Relations. Some of the newer entrants into BI in the last 5 years that have very niche solutions and were not well capitalized, started to get weaker in the last 3 years. And especially with COVID Relations. And pressures on capital structure, we saw them get even weaker and either get bought or start to wither. And in that case, We weren't competing with them directly, but we were competing with their mindshare, right. And so with fewer players and with more consolidation, it tends to be a good thing for us. We saw this cycle in 2,008 and we came out of that very strong and growing. And I think we're seeing something similar now. So As long as we stay focused on our customer, focused on our product, I think we can continue to grow based on some of those trends that we're seeing. And over the next few years, if the trends continue, that's good for MicroStrategy. Thanks, Paul. The next couple of questions, we'll turn to Michael. The digital asset environment continues to evolve rapidly. So a couple of questions. 1st, Wondering if you have a thought about diversifying across other digital assets such as Ethereum instead of staying focused on Bitcoin? Our strategy is to focus upon Bitcoin. We think that Bitcoin is digital property and Digital property, in our opinion, is the most compelling technical opportunity of the decade. Digital property means that 8,000,000,000 people with a mobile phone can carry their property around on a mobile phone. Digital property is a $1,000,000,000,000 opportunity for Apple, for Google, for Facebook, right, for Amazon. Digital property is the solution to the cybersecurity problem and the trust problem across Relations and billions of people, digital property is going to allow 100,000,000 companies to trade with each other on an open The other crypto assets and digital assets have their own places. After Strategy, they're really just a medium of exchange in the crypto universe. So holding digital currency, it's just like holding U. S. Dollars. It's not a strategy for investment. Then you have digital platforms like Ethereum and you have digital applications like the decentralized Relations, Uniswap or something on top of Ethereum. Those are different businesses, but they are in essence Relations businesses that have to compete in a market and you have to consider the digital currencies are competing Relations. The decentralized applications are competing against centralized applications. When I look at all those, I think there's competitive risk, There's technical risk. There's regulatory risk. There's a lot of uncertainty. There's a lot of moving parts Release. And they're completely different businesses. So just because one is involved in Bitcoin doesn't mean that it Relations. So we don't have any intention to get involved with Relations. We're going to stay focused. I guess I'll make one more point here. There are 2 ways to see the world. If you look at the evolution of the crypto economy and if you ask what's the crypto opportunity, one way to see the world is, I take Bitcoin, I create digital property and I plug it into Apple, Amazon, Facebook, Google, I plug it into every insurance offering, I plug it into every mutual fund, into Fidelity, into BlackRock, into PEMCO. I plug it into every product, every device, every service, Every operating system, I plug it into iOS and I plug it into Android and I plug it into Windows, I plug it into the cloud, I plug it into AWS, I plug it into Azure. You see, I can plug the Bitcoin digital property into the entire If you're a big tech company and you plug into Bitcoin, you could generate $1,000,000,000,000 of value just by plugging into Bitcoin. So that Every CEO, every product, every service, everything can be improved by building Bitcoin into it, Right. That's one view of the world. That happens to be our view of the world. By plugging this open protocol You're going to make them better. If you believe that and you don't own a country or you don't Relations. Our government, you don't own a product, you don't own Apple, you don't own Google, you don't own Facebook, into their product and you're the beneficiary, because you can't afford to buy Apple, Amazon, Facebook and Google, all of them. Relations. That's one view of the world. The other view of the world is the innovation is going to come by creating other crypto asset networks, all these other cryptos. And by innovating in that decentralized area, We don't happen to believe that, right. Our belief is that the extraordinary If the City of New York raises $1,000,000,000 and buys Bitcoin and fixes the balance sheet of the City of New York and it happens overnight and it happens That's why we pursue the strategy we pursue. It's a property strategy. If there are Relation. Compelling platforms and applications in the crypto universe that managed to build on top of Bitcoin, then they will benefit and Bitcoin will benefit. And if there are compelling applications in the traditional CFI world, traditional banks, traditional Governments and then Big Tech Companies, then Bitcoin will still benefit. We don't wish to express Risky, most diversified investment strategy is to simply hold Bitcoin. And I know that sounds Complicated. People think you should diversify to decrease risk. Well, we believe we are diversified Relations or 100,000 other technologies that use the Bitcoin will benefit our investment strategy. And so that's why we do what we do. Thanks, Mike. And one quick follow-up on that one. Clearly, with the financing in Q2, we're exploring the inherent value of Bitcoin on the balance sheet. But this person is wondering if you have any updates on how further to use the balance sheet to drive either core business in the core business or help drive the strategy to build our digital asset balance? Yes. Well, Our view with regard to future balance sheet decisions is we'll take into account market considerations And from time to time, we'll find those opportunities. Thank you, Michael. And Phong, next question is for you. Why didn't the company issue the $1,000,000,000 in equity and buy more Bitcoin? Yes. So as I think we're referring to here, we issued put out a shelf to be able to issue $1,000,000,000 in equity. And we put that out on September 14, which is right the day before our quiet period Relations begins, which is September 15. And during that period until our next open period, we're not able to issue shares in the market. And then one more for you, Phong. Subscription revenue growth seems rather modest, especially with continued higher mix in SaaS solutions. How do you feel this is trending against your expectations and around a dozen or so new hyper customers that are net new or expansion from current customers? Yes. So subscription revenues grew 29% year over year, which we were pretty pleased with. I think maybe what you're referring to here is subscription billings, which grew 13%. That's 5 straight quarters of double digit growth, but it is a decline versus previous quarters. The primary reason for that Release is in Q2. We no longer include contract values that are invoiced in the future where we had done that in the past. If we had done the same thing we had in previous quarters, we would have seen subscription billings growth of 42%. And it's a bit of a toss-up there, Different ways to do that, we thought this would be more conservative on a go forward basis. So if you sort of normalize it, the 42% subscription Relations. Billings growth was quite strong. And going forward, I think we'll see that level of subscription billings growth. We still see quite a bit of growth in the cloud business overall. Thank you, Phong. Michael, back to you. Can you walk through some of the factors you consider when determining future debt or equity raises to purchase Bitcoin? And how much room does the business have to raise additional debt or equity to fund Bitcoin purchases? And Relations. Will MicroStrategy evaluate lending Bitcoin for yield? We look at a lot of different factors. We look at the market in Bitcoin. We look at the price of Bitcoin. We look at the trading patterns. We look at the history. We look at the outlook. Relations. We look at the debt markets. We consider fixed income debt markets and both the liquidity available in those markets and also the outlook for those markets and general interest rates and spreads. We look at the convert markets Relations and Trading and the convert markets and the outlook of those markets. We look at our own equity markets and the general software equity and the way that our own stock is traded. We look at the futures and the options market for our stock. We look at the We try to compile all of the information at our disposal. We think about the outlook For our core business, we think about the we look at the technology trends with regard to Bitcoin and how it's being integrated. We look at the macroeconomic trends, what's going on with the macro economy, what's going on in the general market. We look at institutional adoption of Bitcoin and institutional views. We look at the status of the Bitcoin mining industry and also the degree of maturity of Bitcoin mining. And As Bitcoin miners come public, they're getting more better capitalized. And as 1,000,000,000 of dollars flow into the Bitcoin mining So we try to assess that and the overall regulatory environment and then The FUD that's in our rearview mirror and the FUD that we may think will be in our forward mirror. And after we consider all of those Relations, we asked the question, is there an accretive activity that we can take? August of last year, we announced that we were going to buy our stock back to buy Bitcoin. That was a Dutch auction. And sometimes the accretive activity is to convert existing treasury cash and sometimes the accretive activity is to sell convertible debt. We've done that twice. Sometimes the accretive activity is to sell senior secured debt. And from time to time, the accretive activity may be to sell equity. And that really just depends. And so those are all that's a subset of the factors we consider. But you can be sure that we're thinking about it all the time in order to make sure that we act Thank you, Michael. Phong, next question for you. Can you explain the rationale behind creating a separate entity to huddle your Bitcoin? Yes. So we created MacroStrategy LLC. Relation. And other than it being a cool name and we wanted to make sure we had ownership of that. The primary reason was when we issued our secured notes, it was secured against our BI business. So we did not need to used our 92,079 Bitcoin that we had at that point in time to secure the debt. And so we created a separate entity for those 92,079 Bitcoin as separate to our BI business. So that was the primary reason we set it up. And Mike, looking out over the next 1 to 2 years, do you expect institutional adoption to be largely led by founder led Tech Savvy Companies? Or do you expect companies in other industries with a more diverse set of owners to begin adopting cryptocurrency? And what do you think are the next catalysts to drive that broader adoption? I see institutional adoption coming from Macro hedge funds that actually would have bought gold or would have invested in hard assets Now that Bitcoin is getting on their radar as digital property and the Apex digital commodity. And now they've got like a multiyear track record of Bitcoin outperforming gold. I think that there's a lot of money that's going to flow from gold funds and investment funds into digital gold, that is Bitcoin. I think that you're seeing a lot of family offices, high net worth individuals that are private, having private money, They're starting to see Bitcoin as an interesting investment because it's a generational wealth preservation strategy. If I'm investing to give money to my grandchildren that I need a very long duration asset, they're operating out Relief. They just published about a week ago where they indicated there was a lot of interest in Bitcoin from family offices. I think that in terms of public companies, The public companies that you will see embracing Bitcoin most enthusiastically will certainly be the founder led technology companies Relations. Because they have charismatic founders that are risk takers that understand technical nuance, The companies that disrupted digital music, digital video, digital movies, digital books, digital maps, digital retail, They had to think differently. And if you think different, then once you start thinking different about property And it clicks in your mind that bitcoin is digital property, then you go from not understanding it to understanding it. And then there's an oh, crap moment where you realize that not only do you understand it, but If you don't embrace it and your competitor embraces it, then you're going to be at a massive disadvantage. You wouldn't want To be the last big tech network to integrate digital property into the protocol because Founder led tech companies start to embrace Bitcoin. They will do it sooner than other publicly traded companies because they get it and because they need to figure it out for competitive reasons. I mean, the example, right, the big example right now you can see in front of all of us is Square Cash. Square has had extraordinary success implementing Bitcoin into their mobile application. And Relations that has forced a response from PayPal. And I think in time, anybody with a mobile application is going to want to use Bitcoin either to turn themselves into a bank in cyberspace or there's another aspect of Bitcoin, which is It's an international digital value network that allows you to establish trust in cyberspace. So if you are Google or Facebook or Amazon or Apple and you have people posting Online, you've got a cybersecurity issue. The way that you actually can deploy cybersecurity is plug them into Relations. A network like Bitcoin that allows for the rapid interchange of value on an open protocol. Then you can use that to fight denial of service attacks, DDoS attacks. You can use it to fight and to ameliorate or attenuate So I think Bitcoin is really the it's the secret to cybersecurity going forward. And this is really important issue for all of these Technology Companies and is also a bank in cyberspace. And so it's Those companies can't really afford to ignore that. They would ignore that at their own peril. I think you'll see more with regard to that as time goes on. And then I think the last area Of adoption with regard to public companies, there will be visible and I think give it 6 months, you'll see a lot of it. You're just going to see an avalanche Relations. Every month or every few weeks, there's a new Bitcoin miner that's announcing that they're coming public. Relations. So the NASDAQ or the New York Stock Exchange, if you roll the clock back 12 months, it's hard to find any Relations. Any publicly traded company with more with $1,000,000 of Bitcoin on their balance sheet, right now, There is a dozen or more with 1,000,000,000 and 1,000,000,000 of dollars of Bitcoin on our balance sheet. But what happens when there's 2 dozen We're 3 dozen companies and they've all got material Bitcoin exposure because they have to. I think that that's going to catalyze a lot of maturity of the asset class. Relations. Thanks, Michael. We're at that time. So I'm going to turn it back to you for closing remarks. So Michael, closing remarks from you. Sorry. Yes. Okay. I want to thank everybody for being with us for our Relations. We appreciate your support to all of our shareholders. We couldn't do it without you.